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3 Retail Stocks Nudging The Industry Higher

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Two out of the three major indices traded up today One out of the three major indices traded up today The three major indices are trading lower today with the Dow Jones Industrial Average ( ^DJI) trading down 30.21 points (-0.2%) at 16,882 as of Wednesday, July 30, 2014, 3:55 PM ET. The NYSE advances/declines ratio sits at 1,028 issues advancing vs. 1,986 declining with 144 unchanged.

The Retail industry as a whole closed the day up 0.7% versus the S&P 500, which was up 0.1%. Top gainers within the Retail industry included U S Auto Parts Network ( PRTS), up 2.1%, Fairway Group Holdings ( FWM), up 2.5%, Builders FirstSource ( BLDR), up 2.7%, Pantry ( PTRY), up 13.1% and Citi Trends ( CTRN), up 2.3%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

Builders FirstSource ( BLDR) is one of the companies that pushed the Retail industry higher today. Builders FirstSource was up $0.16 (2.7%) to $6.24 on heavy volume. Throughout the day, 608,865 shares of Builders FirstSource exchanged hands as compared to its average daily volume of 373,900 shares. The stock ranged in a price between $6.08-$6.25 after having opened the day at $6.12 as compared to the previous trading day's close of $6.07.

Builders FirstSource, Inc. manufactures and supplies structural and related building products for residential new construction primarily in the southern and eastern United States. Builders FirstSource has a market cap of $573.3 million and is part of the services sector. Shares are down 14.9% year-to-date as of the close of trading on Tuesday. Currently there are 3 analysts who rate Builders FirstSource a buy, no analysts rate it a sell, and 2 rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Builders FirstSource as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, generally higher debt management risk and poor profit margins.

Highlights from TheStreet Ratings analysis on BLDR go as follows:

  • The revenue growth came in higher than the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 8.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • BUILDERS FIRSTSOURCE reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, BUILDERS FIRSTSOURCE continued to lose money by earning -$0.44 versus -$0.58 in the prior year. This year, the market expects an improvement in earnings ($0.40 versus -$0.44).
  • The debt-to-equity ratio is very high at 28.11 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, BLDR's quick ratio is somewhat strong at 1.36, demonstrating the ability to handle short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Building Products industry and the overall market, BUILDERS FIRSTSOURCE's return on equity significantly trails that of both the industry average and the S&P 500.

You can view the full analysis from the report here: Builders FirstSource Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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